Diversity in Silicon Valley: An Interview with VC Lisa Suennen of GE Ventures

The world of venture capital has, in recent years, captured the imagination of the general public through the stories coming out of Silicon Valley. However, the VC world has also drawn its share of criticism for its lack of diversity and even lack of social empathy, especially in the past year. As one of the few women VCs, Lisa Suennen (Senior Managing Director, Healthcare at GE Ventures and Managing Partner at Venture Valkyrie) has a unique inside view of this world. In 2016 I spoke with her about her career and her views of the good and bad sides of venture capital for World 50. Given the current debate, I thought it would be interesting to share her comments with a wider audience.

Carlos Alvarenga: Let’s start by recapping your background and how you got into the VC world.

Lisa Suennen: I started my career by getting a master’s in political science. I had the intent of going into politics in some way, and along the way I got diverted. When you’re in Silicon Valley, you can’t help but nd your way to tech, even back in the ‘80s. So, I started off in the tech world, but after a few years I really wasn’t excited by it. I then found my way to a health care startup in the mental health services area, and I became part of the management team. I was very fortunate to help grow it into a very large company, at least by startup standards. We took it public, and then it ultimately got acquired.

When we sold the company, I helped start a venture fund to focus on the idea that you could save money in health care by improving access and by lowering cost. We wanted to align the financial and incentives to have good outcomes.

I spent 15 years at the venture fund and then set out on my own. For the last three years, I have worked mostly with corporate venture rms to improve the quality of their strategy or with large companies interested in partnering better with startups.

Basically, I’m long-time health care investor and entrepreneur. I’m also on the advisory board of many organizations, including NASA’s astronaut health innovation program, the American Heart Association’s Innovation Think Tank and a number of other really interesting groups.

CA: In 2016, you published a post on what you call “The Dark Side of Venture Capital.” What were you trying to say with this piece?

LS: I have been writing a blog for several years now. I use it as a forum to talk about investing in venture capital and also about health care issues generally. I try to write honest and sometimes funny pieces; my goal is to help people understand what’s going on with both sides of VC.

What led to this particular piece was this: I was invited to talk to a group of entrepreneurs, and I had to write the speech for that event. The gentleman who invited me to speak suggested the title: “The Dark Side of Venture Capital.” I thought it was a funny topic because I own a big painting of a little gremlin saying, “Come to the dark side; we have cookies.” There’s so much legend and so much pop culture throwaway stuff about what venture capitalists are like, I decided to give my take on the good and the bad. For example, if you watch Silicon Valley, which many people do, it’s funny because it’s practically a documentary. As the show highlights, there is a lot of questionable behavior by both entrepreneurs and venture capitalists, just as there is a lot of great behavior. So, I wanted to clarify what I thought were the questions and issues that matter to VCs, to help entrepreneurs better separate myth from reality.

CA: In the article, you talk about some of these myths, and it’s clear you think some of the negative myths are real.

LS: Well, I think there’s absolute truth in the things that are the dark-side items, and there’s just as much absolute truth in the things that are on the light-side list, the good stuff. As with most things, circumstances drive how people behave, good and bad; and character drives how people behave, good and bad. At times, people with good character can be driven to complicated and difficult behaviors as VCs. I think those behaviors are sometimes interpreted as mean-spirited or bad, when in fact they’re rational based on the job description of what a venture capitalist is supposed to do. I mean, the VC job description depends a little bit on where you sit, but, if you’re in an independent fund, your job description is to get money from people who trust you and to make it into more money. That’s it. There’s no embellishment needed. My goal is to help people understand what’s going on with both sides of VC.

CA: That’s not what most VCs will tell you their job description is…

LS: It is. It’s fundamentally how they get measured. It’s fundamentally how they measure themselves. If they help to create a bunch of great companies, or help to save the world in some way, but don’t create a big return on investment, they have failed in their fundamental mission. So, I think sometimes the behaviors that you see from venture capitalists are not bad; they’re just rational. On the other hand, sometimes VCs are wonderfully helpful, and the entrepreneurs don’t appreciate it.

CA: Do you think this misperception is one of the problems with VC? It’s interesting that if one asks a private equity partner or Wall Street trader about the job, the ROI focus is always first and foremost. But to a lot of people in Silicon Valley, just making money is rarely the first thing they point to about their job or firm.

LS: Welcome to marketing…

CA: Why do you think somebody on Wall Street is ne with making money as their job description, but VCs might be almost embarrassed to say, “I’m here to make my LPs richer?”

LS: Well, I don’t think it’s universally true. There are VCs who will tell you the truth. But I think it’s become very de rigueur in Silicon Valley to talk about innovation, which is legitimate; there’s a lot of innovation here, and innovation is what drives the money. However, VCs who get confused about what they’re here to achieve for their own investors are not going to do well. Yes, finding innovation and backing fantastic entrepreneurs is how you get returns, absolutely, but I think clarity around the financial side is very stark inside any VC partner meetings, regardless of what they might say to the outside world. Entrepreneurs who fail to understand that primary motivation shouldn’t seek venture capital because they will be disappointed.

I’ve had many conversations over the years with entrepreneurs who have objectives that are different from ensuring that their investors make a lot of money. That’s perfectly legitimate. Founders can have any objective they want, and there’s nothing wrong with that. But they need to understand those objectives may not be well aligned if they try to raise capital from the VC world.

CA: Do you think that changes when you’re a corporate VC? We had a whole series of discussions in the past few years with VCs, and an interesting debate emerged. One view was something like, “I don’t care who you are; first you bring back the money. If you find some interesting things along the way that help the business, that’s fine, but there’s a hurdle rate that must be met.” Other VCs had a completely opposite view. For them, corporate VC should be thought of almost as R&D, with the focus being on finding interesting tech and not the financial returns of a private fund. How do you define success for a CVC group?

LS: That’s a tough one, because I think it depends what type of corporation you are, for one thing, and it depends on your ultimate objectives when you’ve decided to set up a fund. One of the things I found with a lot of clients is that they had not set out their CVC objectives clearly; you really have to decide what those are from the very beginning. Then you must revisit them over time, because if you’re a public company you absolutely must factor in financial return into your strategy and objectives. It may not be the only goal, and it can be relative to other ways of improving stock price such as R&D, or product acquisition, or things that amplify strategy and revenue for the company in a positive way. But financial returns are important regardless of what type of VC you are; they just may not be the primary objective.

I think that most of the corporate venture funds that say, “We don’t care about returns,” tend to perform poorly. It’s almost impossible to measure the strategic value of CVC investment in any way other than that, except as something completely subjective. Can you say the investment I made in XYZ Technology Company enabled me to get two cents more per share, or attract more business from the marketplace? Perhaps, but it’s very hard to draw a straight line at times. In the end, you could invest in companies that may have great technology, but if they’re not solid financially, and they ultimately fail, what good did it do you?

CA: Returning to your article, how different would your dark-side list have been if the audience had been C-suite executives and not entrepreneurs?

CA: Well, I would say to them that it’s really important to, again, start with what you are trying to achieve, and to document that and make it clear to the executive team and the investment team. You have to have a mission, a set of objectives and a set of measures that you and your executives are going to track. It matters less what they are as long they’re agreed upon, clear and sustainable over the long term. I definitely think that creation of financial value has to be one of them because, as I said, I think it’s a proxy for the discipline that helps companies be successful.

I would also say to your members that they should hire people who are savvy investors, not just savvy about your company, because it’s really a different job to be an investor, even for strategic purposes, than it is to be an operating person.

CA: Is the phrase “Corporate VC” an oxymoron, as one of our lab guests once joked?

LS: No, I don’t think so at all. I think that there are great corporate VCs. They do great work and make it possible for entrepreneurs to grow in markets traditional VCs won’t enter. Moreover, some corporate VCs will take a lot more risk than traditional VCs, particularly in health care, which is my focus of course. For example, as you know, a lot of traditional VCs have gotten away from the seed stage, or series A rounds. They see early funding as “too risky,” which is ironic given what we’re supposed to be doing theoretically. Our limited partners have gone away from that level of risk in many cases. Yet the corporate VCs are willing to take some losses because they can absorb them more readily—not that they want to, but they can—and they can often see other ways of creating value that a traditional VC can’t.

CA: If that’s a positive side of CVC, what’s another major challenge besides a lack of clear goals?

LS: One of the hardest things that corporate venture funds nd is that it’s almost impossible to get their operations to adopt the products they nd. The efforts some CVC teams have to go through to get operations to engage are extraordinary. A key source of this problem is not engaging the operations teams in the CVC strategy from the start, especially if you’re investing in things that might impact operations themselves. After all, if you’re doing a really good job finding disruptive and innovative companies, you might be disrupting and innovating your operating team out of a job. Hospitals run into this issue all the time. They invest in some incredibly advanced telemedicine strategy, for example. But the doctors feel disintermediated, so they don’t want to adopt it. In the end, the hospitals get very frustrated. The same thing happens with IT teams. I think the challenge is figuring out how to create meaningful intellectual ow between operations and the investment side, especially if you’re doing CVC for more than just financial reasons.

In the end, you could invest in companies that may have great technology, but if they’re not solid financially, and they ultimately fail, what good did it do you?

CA: Changing topics, one of the things you highlight in your writing is that the standard VC model can be very repetitive and can chase the same thing over and over again. Some people trace this phenomenon to a lack of intellectual diversity. Indeed, a lack of diversity overall is a major critique of Silicon Valley. As a woman venture capitalist, do you think that’s fair? If it’s fair, do you see it changing?

LS: I do think it’s fair. The vast majority of VCs in Silicon Valley, and elsewhere, are young or middle-aged white men. The number of women partners in venture capital is very small: about 6 percent. The number of minority VC partners is even smaller. I so rarely see a black or Hispanic person in my field that it’s a surprise when I do. It’s remarkable how homogeneous the VC group is. I can tell you from my own experience that diversity matters a great deal, because different people with different backgrounds think differently from each other. Bringing a diverse viewpoint is essential to creating great companies. There are many research studies out there that show that when you bring diverse viewpoints to companies you get better projects, better outcomes and generally just better earnings. Yet Silicon Valley fails to learn this lesson again and again.

Do I see it getting better? No and yes. From the traditional fund standpoint, I’d
say absolutely not, except for the fact that there have been a number of funds
started in the recent past by women partners. They are hiring other women
and engaging them in that way. I’m not sure that’s the ideal solution, but at least
it’s a pathway for women into the eld. On the corporate side, there’s definitely more diversity. Most—not all, but many—corporations have already realized that it’s important to have diversity in the workforce, and they have programs to ensure that.

Overall, it’s been a problem, and I think it’s actually getting worse not better. It’s the lack of diversity in Silicon Valley that leads to lots of poor decisions. That’s unfortunate.

CA: Lisa, why do you think that’s the case? Certainly, you see some diversity in the founders, at least in some ways…

LS: You see some diversity on the founder side but not on who gets funded. Women and minorities get less than 8 percent of venture funding. It really doesn’t matter how many diverse founders there are if nobody’s going to back them. The traditional venture funds, the stand-alone private ones, are small. Partners hire their friends and their colleagues. They hire people they want to hang out with, and people want to hang out with people who are like them and that’s who they want to invest in also. It’s not about venture capital; it’s about human behavior. Humans are far too ready to live with homogeneity than is healthy for business.

CA: Given that you have this critical mass that self-reinforces today, what, if anything, could break through that?

LS: Well, I do think it’s good that women and others are starting their own rms and getting into the ow of deals. I do think it’s good that some corporate venture funds have stepped up and hired diverse groups of folks into their organizations. That said, I think fundamentally it’s going to be successes by entrepreneurs who are diverse that will change things. Some of these people are former executives, by the way, who have operating backgrounds and can make better venture capitalists than people who come out of finance backgrounds. As you see more diverse founders being more successful and stepping into venture capital, that’ll probably help to change the culture.

CA: Maybe even as some of today’s female CEOs and CXOs exit the corporate arena and start their own funds?

LS: I think that’s true in theory. In practice, we shall see. I started a not-for-profit called CSweetener to bring formal mentorship programs to women who are new to the C-suite—matching them with very experienced folks, not just in venture capital, but across the board in health care to help them get formal mentoring on how to excel in the C-suite. There are other efforts like mine, but I think it’s going to take a lot of work, and big companies getting behind them, to make a difference. For example, I was really gratified that one of my backers for CSweetener was Dignity Health, a very large health care system that has absolutely committed to diversity. I think some 60-70 percent of their workforce is female, which is common at hospitals. And among their CXOs, it’s a real mix of women and men of different racial backgrounds. I think it’s wonderful. There are some organizations demonstrating they really care about these things.

CA: You brought up the show Silicon Valley. In that show, one of the main VC characters dies and is replaced by a woman. The woman acts exactly as the man did. The behavior is the same; only the gender is different.

LS: Well, that particular character in Silicon Valley is funny because not only is she male-ish, but she also has terrible social skills and doesn’t care about those things. She has no self-awareness, and I think the fact that they chose a woman for that role is actually quite hilarious. It was a funnier decision than just putting in another guy who you would expect to act that way. That it is a woman just points out the extreme nature of the behavior because you expect her to be warm and fuzzy.

CA: Do you find that women VCs are different, or do they eventually fall into the same patterns of behavior you talked about in your article?

LS: I don’t think this is special to venture capital, and you find it in all fields where men are dominant. I think younger women really struggle with the issue of how to act in the workplace when being yourself is not acceptable. I mean, you’re taught this from an early age as a girl: that your work is not good enough; your looks aren’t good enough, your intellect isn’t good enough; your whatever isn’t good enough. So, I think women grow up struggling with this issue in male-dominated fields, until they reach a certain age, and they’ve just had enough.

It’s in the mid-40s when women start to recognize that you may as well be you, because you’re not going to be accepted any other way. By being who you are, you can at least give yourself that break. I think women who’ve been at it longer tend to have a little more comfort with themselves and are willing to be whoever they really are. If they are more masculine or more feminine, that’s more of a character trait than it is an affect at that point, and that’s great.

In the end, I think more women should be encouraged to be who they are from the start of their careers and be respected for who they are. The stereotype of the six-foot-five white guy driving his Tesla up and down Sand Hill Road is not necessarily something to aspire to, unless you happen to be six-foot-five.

I think diversity in all things is a good thing. This job requires intellect. It requires commitment; it requires passion to do it well. Those are not special to any one type of person.

CA: Let’s end on that note: What’s your advice to a young woman who is getting out of business school and thinking: “I can go to McKinsey. I can go to the corporate world, or I can try to climb up the Silicon Valley ladder…”

LS: I get asked this question a lot, because I teach at the business school at UC Berkeley. Often, young women and men, too, nd their way to me and ask me these questions. I always say three things:

First of all, pick something you actually want to do that’s fun, not that you’re told you should do because it’s cool or whatever. Pick something you’re excited about. Second, and probably more important, whatever your opportunities, pick the one in which you like the people the most. In the end, what really matters is that you find a group of people who want you to succeed and whom you want to help succeed. A great team working at a so-so job is always better than a lousy team at some fabulous technology company, because that is soul crushing. Lastly, commit fully to being yourself from day one. You know, either people like you or they don’t, but don’t get hung up on it.

Focus on being just who you are. It’s too much energy to be who you’re not, and you need that energy to do your job well. Channel that energy for good. I think women who’ve been at it longer tend to have a little more comfort with themselves and are willing to be whoever they really are.